As brokers continually add innovative features to enhance interaction between traders, social trading has increasingly grown in popularity in recent years.

However, not everyone who wishes to participate in the financial markets has the time or energy to train for it.  Luckily, technological advances like automated trading help simplify novice traders’ experience through social trading and mirror trading.

Let’s dive into the differences and similarities between social trading and mirror trading:

1. Social Trading

Much like any social network, social trading allows you to be “social,” share ideas and insights, and learn from others how to trade.  Investors will be able to observe the trading behavior of their peers and expert traders and allow them to copy their styles.

The online trend has become especially popular amongst beginners who want to gain access to the financial markets while learning from other, more experienced traders.

By using a fully integrated social trading platform, traders can easily facilitate the complete sharing of trading strategies using a “copy trading” or “mirror trading” feature.

Traders literally “copy” or “mirror” what other traders do, and this is why “social trading” is a common umbrella term for copy and mirror trading strategies.

2. Mirror Trading

First introduced in the foreign exchange market in the early 2000s, mirror trading differs from social trading in that traders will be mirroring the trading style of someone else without actually learning anything from it.

The automated nature of mirror trading helps prevent investors from making emotion-based trading decisions because it determines when a trade gets opened, closed, or amended.

Instead of worrying about the market’s day-to-day fluctuations, an investor can study the performance of their mirror trading account and decide whether they want to continue using the same strategy.

3. Consensus

Broadly speaking, the basis of social trading and mirror trading (also known as copy trading) is essentially the same, copying the strategies and techniques of another trader.

Any form of trading involves some risk once real money is invested and requires extensive knowledge and experience.  So, if you do not have sufficient time to stay up to date with news events affecting the business world and are not capable of reading charts and analytics reports, you may lose money in the market.

Ensure you do adequate research and check performance records of any investment strategy you want to try out.  You can also limit the risk by only allocating a small portion of your total capital to a social trading or mirror account.

Lastly, it is essential to only consider social trading when dealing with a well-regulated, reputable broker to avoid risking more than you can afford.